Engineered component maker Leggett & Platt, Inc. (LEG), Thursday reported a plunge in second quarter profit, as sales dropped substantially reflecting weak sales from all its segments. Results also reflects non-cash write down related to last year's aluminum segment divestiture. Leggett & Platt also warned its full year 2009 earnings would be less than its previous projection.
For the second quarter, net income attributable to L&P plunged to $19.0 million or $0.12 per share from $46.3 million or $0.27 per share in the same quarter a year ago.
Net earnings from continuing operations was $19.1 million or $0.12 per share, down from $45.2 million or $0.25 per share in the comparable quarter last year.
On average, six analysts polled by Thomson Reuters expected earnings of $0.14 per share for the quarter. Analysts' estimate typically excludes one-time items.
Profit for the quarter dropped primarily due to lower sales and an $11 million or $0.04 per share non-cash write-down of the note received in last year's aluminum segment divestiture.
Net sales for the quarter dropped to $757.4 million from $1.06 billion in the prior-year quarter, while the Street expected revenues of $780.82 million.
In the immediately preceding first quarter, Leggett & Platt reported a sharp decline in profit to $8.9 million or $0.06 per share, on lower revenues reflecting weaker sales from all its segments. Sales from continuing operations dropped 28% to $718.1 million.
Amongst others in the industry, Flexsteel Industries Inc. (FLXS) reported a slip to loss in the third quarter at $1.9 million or $0.28 per share, as sales dropped to $73.6 million from $98.1 million in the prior-year quarter.
Another peer, Genuine Parts Co. (GPC) reported a second-quarter profit that declined 22% to $103.61 million or $0.65 per share, as sales declined across all segments. Net sales were down 4% at $2.53 billion.
For the quarter under review, Segment wise, revenues from Residential Furnishings of Leggett & Platt dropped 24.2% to $418.3 million. Commercial Fixturing and components declined 27.1% to $130.6 million, due to the company's decision to walk away from sales with unacceptable profit margins, market softness in office furniture components, and reduced spending by retailers.
Industrial Materials plunged 39.4% to $102.9 million as a result of weak demand and lower steel prices. Specialized products fell 34.9% to $105.6 million reflecting weak global demand in all parts of the segment - automotive, machinery, and commercial vehicle products. Intersegment sales were down at $66.7 million, compared to $105.5 million from the year-earlier quarter.
Selling, general and administrative expenses were $89.0 million, compared to $107.6 million in the year-earlier quarter.
For the six-month period, net income attributable to L&P dropped 28% to $22.3 million or $0.14 per share from $89.7 million or $0.48 per share in the year-earlier period. Net sales for the period was $1.49 billion, down 28% from $2.06 billion in the corresponding period last year.
For full year 2009, Leggett & Platt now expects earnings from continuing operations in a range of $0.55 to $0.70 per share, down from the prior projected range of $0.60 to $0.90 per share.
The company also revised its 2009 sales expectation to $3.0 billion. Previously, the company expected sales in the range of $2.9 billion to $3 .3 billion.
Analysts currently anticipate Leggett & Platt to earn $0.64 per share on revenue of $3.08 billion for the year.
For the second half of the year, earnings are anticipated by the company to be in a range of $0.41 - $0.56 per share.
The company said it was struck badly by unanticipated and unusual items, bad debt expense associated with a customer bankruptcy and the divestiture note write-down that caused an $0.08 reduction to the guidance range.
David Haffner President and CEO commented, "Operationally, we are seeing significant benefit from our efforts over the last three quarters. Despite an anticipated full year sales decline of about 25%, gross margin is increasing. Gross margin for 2009 should approach 20%, a significant improvement over recent years, due to our cost containment efforts, headcount reduction, facility consolidations and dispositions."
Commenting on the projection, the company said it does not expect to the steel deflation to continue into the second quarter and that additional improvement for the remainder of the year should result from reduced bad debt expenses, non-recurrence of the divestiture note write-down, and cost reduction initiatives.
On April 23, 2009, brokerage Hilliard Lyons downgraded Leggett & Platt shares to 'Long-term buy' from 'Buy', with a mean target of $17.40.
LEG closed Thursday's regular trading at $16.50, up $0.56 or 3.51%, on a volume of 1.65 million shares. In after-hours, the stock dropped $0.01 or 0.06%, to trade at $16.49. In the last 52-week period, the stock traded in the range of $10.03 to $24.60, with a three-month average volume of 1.66 million shares.
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